Should a business be registered?

Around this time of year, clients want to know about registering their business. There is confusion about the timing or if there’s a deadline.

I thought I would help clarify this question for anyone starting a business by Dec. 3.

To begin with, the biggest misconception is the idea that registering your sole proprietorship in required. A sole proprietorship means you own the business, and income from the business is reported on your personal tax return.

I had a client wanting to register her business with the province. She was setting up a home-based bookkeeping business. When I asked her if she had any clients, she explained that she had three business clients, and didn’t plan on getting any more since these three would keep her quite busy.

I then asked her if a trade name was important to her. Since she didn’t plan on advertising her service to the general public, she figured that it wasn’t important. I suggested she simply operate her business in her legal name. She was pleasantly surprised when I told her she didn’t have to register her name as a business and pay the $60 licence, or set up a business bank account. As long as she reports the income from her bookkeeping business as self-employment income on her personal tax return, she would be 100 per cent compliant with government regulations.

So, whether you are operating your business in your own name, or a trade name, the income from your business is always reported on your personal tax return. To qualify for any business expense deductions to reduce your taxable business income, you do not have to register the business with the province.

In the case of my bookkeeping client, she will simply total her business income and deduct any business expenses from that income, up to Dec. 31 of each calendar year, and report this as self-employment income on her annual income tax return.

So, don’t worry about having to register your business by Dec. 31 this year. Just remember to keep all expense receipts related to your business, and invoices issued to your customers up to the end of each calendar year.

Roy Weber is the advisor at the Waterloo location of the Waterloo Region Small Business Centre, roy.weber@waterloo.ca. Visit Jennifer Penney at your local Cambridge office, 50 Dickson St. or call 740-4615.